30 June 2006
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[Federal Register: June 30, 2006 (Volume 71, Number 126)]
[Proposed Rules]
[Page 37517-37525]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jn06-21]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
15 CFR Parts 764 and 766
[Docket No 060511128-6128-01]
RIN 0694-AD36
Antiboycott Penalty Guidelines
AGENCY: Bureau of Industry and Security, Commerce.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would set forth BIS policy concerning
voluntary self disclosures of violations of part 760 (Restrictive Trade
Practices or Boycotts) of the Export Administration Regulations (EAR)
and violations of part 762 (Recordkeeping) of the EAR that relate to
part 760. This proposed rule also would set forth the factors that the
Bureau of Industry and Security (BIS) considers when deciding whether
to pursue administrative charges or settle allegations of such
violations as well as the factors that BIS considers when deciding what
level of penalty to seek in administrative cases.
DATES: Comments must be received by August 29, 2006.
ADDRESSES: Comments may be made via the Federal e-Rulemaking portal at,
http://www.regulations.gov, by e-mail directly to BIS at
publiccomments@bis.doc.gov, via fax at (202) 482-3355 or to U.S.
Department of Commerce, Bureau of Industry and Security, Regulatory
Policy Division, Room 2703, 14th Street and Pennsylvania Avenue, NW.,
Washington, DC 20230. Please refer to RIN 0694-AD36 in all comments.
FOR FURTHER INFORMATION CONTACT: Edward O. Weant III, Acting Director,
Office of Antiboycott Compliance, Bureau of Industry and Security,
United States Department of Commerce, at (202) 482-2381.
SUPPLEMENTARY INFORMATION:
Background
Part 760 of the EAR--Restrictive Trade Practices or Boycotts--
prohibits U.S. persons from taking or knowingly agreeing to take
certain actions with intent to comply with, further, or support an
unsanctioned foreign boycott. Part 760 of the EAR also requires U.S.
persons who are recipients of requests ``* * * to take any action which
has the effect of furthering or supporting a restrictive trade practice
or boycott fostered or imposed by a foreign country against a country
friendly to the United States or against any United States person * *
*'' to report receipt of those requests and whether they took the
requested action. Part 762 of the EAR--Recordkeeping--requires, inter
alia, retention of certain documents that contain information related
to the prohibitions or reporting requirements of part 760. Collectively
these provisions of the EAR are referred to in this notice as the
antiboycott provisions. BIS administers and enforces the antiboycott
provisions through its Office of Antiboycott Compliance (OAC). This
proposed rule would: Set forth specific procedures for voluntary self
disclosures of violations to OAC, provide guidance about how OAC
responds to violations of the antiboycott provisions, and describe how
OAC makes penalty determinations in the settlement of administrative
enforcement cases related to the antiboycott provisions.
This rule would not address disclosure provisions or penalty
determination factors in any other matters such as criminal
prosecutions for violations of the antiboycott provisions or tax
penalties that the Department of Treasury may impose for antiboycott
violations that arise pursuant to the Ribicoff Amendment to the Tax
Reform Act of 1976, as implemented by Section 999 of the Internal
Revenue Code. Voluntary self-disclosure provisions and guidance on
charging and penalty determinations in settlement of administrative
enforcement cases that are not related to the antiboycott provisions
are stated elsewhere in the EAR.
Proposed Changes to the EAR in This Rule
This rule would create a new Sec. 764.8 setting forth the
procedures for voluntary self-disclosure of violations of the
antiboycott provisions. It would also create a new supplement No. 2 to
part 764 that would describe how BIS responds to violations of the
antiboycott provisions and how BIS makes penalty determinations in the
settlement of administrative enforcement cases. The rule would also
make technical and conforming changes to part 766.
This rule would provide specific criteria with respect to what
constitutes a voluntary self-disclosure and how voluntary self-
disclosures relate to other
[[Page 37518]]
sources of information that OAC may have concerning violations of the
antiboycott provisions. The rule would also inform the public of the
factors that OAC usually considers to be important when settling
antiboycott administrative enforcement cases. BIS believes that
publishing this information in the EAR will tend to place all potential
respondents and their counsel on a more equal footing because
procedures for making voluntary disclosures, information about how OAC
responds to violations and how OAC makes penalty determinations in the
settlement of administrative enforcement cases will all be matters of
public record. BIS also believes such publication will make settlement
of administrative cases more efficient, as respondents and OAC will be
able to focus on the important factors in administrative enforcement
cases and because OAC generally expends fewer resources to obtain
information received through voluntary self-disclosure than information
obtained by other means.
Creation of Sec. 764.8--Voluntary Self-Disclosure of Boycott
Violations
The proposed new Sec. 764.8 would both define what constitutes a
voluntary self-disclosure and provide the procedures for making such
disclosures. Compliance with the provisions of Sec. 764.8 would be
important as a voluntary self-disclosure ``satisfying the requirements
of Sec. 764.8'' would be designated as a mitigating factor of ``GREAT
WEIGHT'' in the settlement of administrative cases as set forth in the
proposed new Supplement No. 2 to part 764. Supplement No. 2 would
provide that such factors ``will ordinarily be given considerably more
weight than a factor that is not so designated.'' In addition to
providing such an incentive for the submission of voluntary self-
disclosures, BIS anticipates that proposed Sec. 764.8 will promote
more effective use of OAC resources, as the receipt of voluntary self-
disclosures will reduce the time that OAC must spend identifying and
investigating possible violations. The rule provides the benefit of a
mitigating factor to those who self-disclose before OAC has invested
resources to investigate violations based on information it might
receive from another source.
Proposed Sec. 764.8 requires, among other things, that voluntary
self-disclosures be in writing and that they be received by OAC before
OAC learns of the same or substantially similar information from
``another source'' and has commenced an investigation or inquiry in
connection with that information. The proposed Sec. 764.8 would
provide that persons may make an initial written notification followed
by submission of a more detailed narrative account and supporting
documents. For purposes of determining whether a voluntary self-
disclosure was received before OAC learned of the same or substantially
similar information from another source, the date of the voluntary
self-disclosure will be deemed to be the date that OAC received the
initial notification if the person making the disclosure subsequently
submits the required narrative account and supporting documentation.
BIS believes that requiring voluntary self-disclosures to be in
writing reduces the possibility of confusion as to whether a particular
communication was intended to be a voluntary self-disclosure and is
likely to produce more complete disclosures than would oral
disclosures.
BIS recognizes that two features of its existing regulations and
practices may impact the requirement that a voluntary self-disclosure
be received before OAC learns of the same or substantially similar
information from another source. The first such feature is the set of
reporting requirements in Sec. 760.5. The second such feature is OAC's
practice of encouraging persons with questions about the regulations to
contact OAC by telephone or e-mail for advice.
Section 760.5 of the EAR, requires any ``U.S. person who receives a
request to take any action that would have the effect of furthering or
supporting a restrictive trade practice or boycott fostered or imposed
by a foreign country against a country friendly to the United States or
against any United States person'' to report to OAC both receipt of the
request and the action that the person took in response to that
request. In some instances, taking the requested action would be a
violation of Sec. 760.2. BIS recognizes that, in such instances, the
reporting requirements of Sec. 760.5 would have the effect of
requiring a person to disclose a violation that it had committed. The
proposed rule provides that reports filed pursuant to Sec. 760.2
constitute ``information received from another source.'' Thus, a person
who wishes to make a voluntary self-disclosure of a violation that is
based on an action that Sec. 760.5 requires that person to report
would have to make sure that OAC receives the written initial
notification portion of the voluntary self-disclosure before OAC began
an investigation or inquiry based on the information received in the
required report. The report itself would not serve as the initial
notification. However, if OAC received the report and the initial
notification simultaneously, it would be deemed to have received the
initial notification before it had begun an investigation or inquiry
based on the report. That person would then have to comply with the
remaining requirements of Sec. 764.8, but once that person complied
with those requirements, the voluntary disclosure would be treated as
having been received at the time that the initial notification was
received.
OAC has, for a number of years, provided advice about the
antiboycott provisions to persons requesting such advice via telephone
or e-mail. In some instances, the person requesting such advice may
disclose that it has committed a violation. OAC's practice has been to
encourage such persons to make voluntary self-disclosures. OAC wants to
continue to encourage persons with questions about the antiboycott
provisions to fully disclose all relevant facts when making telephone
or e-mail inquiries for advice concerning the antiboycott provisions.
Therefore, OAC will not treat violations revealed in telephone or e-
mail requests for advice concerning the antiboycott provisions as
information received from another source. However, to meet the
requirements of Sec. 764.8, the person wishing to make a voluntary
self-disclosure would have to make a written disclosure pursuant to
Sec. 764.8. The information provided over the telephone or via e-mail
while seeking advice would not constitute a voluntary self-disclosure
or even an initial notification of a voluntary self-disclosure. OAC's
practice is to inform people who reveal violations in the course of
seeking such advice of their opportunity to make a voluntary
disclosure.
Proposed Sec. 764.8 also provides that for a firm to be deemed to
have made a voluntary self-disclosure under that section, the
individual making the disclosure must do so with the ``full knowledge
and authorization of the firm's senior management.'' OAC believes that
this requirement is needed to make clear that a firm may not claim the
benefits of a voluntary self-disclosure when a subordinate employee
acting on his or her own initiative disclosed wrongdoing by the firm's
management.
Creation of Supplement No. 2 to Part 764
This rule would also create a new supplement to part 764 to set
forth publicly BIS's practice with respect to violations of the
antiboycott provisions. The proposed supplement describes the ways that
BIS responds to violations,
[[Page 37519]]
the types of administrative sanctions that may be imposed for
violations, the factors that BIS considers in determining what
sanctions are appropriate, the factors that BIS considers in
determining the appropriate scope of the denial or exclusion order
sanctions, and the factors BIS considers when deciding whether to
suspend a sanction.
Paragraph (a) of the proposed supplement contains introductory
material that defines the scope and limitations of the supplement as
well as sets forth BIS's policy of encouraging any party in settlement
negotiations with BIS to provide all information that the party
believes is relevant to the application of the guidance in the
supplement as well as information that is relevant to determining
whether a violation has, in fact, occurred and whether the party has a
defense to any potential charges.
Paragraph (b) of the proposed supplement sets forth the three
actions that OAC may take in response to a violation, which are: Issue
a warning letter, pursue an administrative case, and refer a case to
the Department of Justice for criminal prosecution. This paragraph also
lists the factors that often cause OAC to issue a warning letter. It
also notes OAC's ability to issue proposed administrative charging
letters rather than actual administrative charging letters. Proposed
charging letters are issued informally to provide an opportunity for
settlement before initiation of a formal administrative proceeding. As
noted in paragraph (b), OAC is not required to issue a proposed
charging letter. Finally paragraph (b) notes that OAC may refer a case
to the Department of Justice for criminal prosecution in addition to
pursuing an administrative enforcement action.
Paragraph (c) of the proposed supplement lists the types of
administrative sanctions that may be imposed in administrative cases.
Those sanctions are: A monetary penalty, a denial of export privileges
and an order excluding the party from practice before BIS.
Paragraph (d) provides information about how OAC determines what
sanctions are appropriate in settlement of administrative enforcement
cases. The paragraph describes the general factors that BIS believes
are important in cases concerning violations of the antiboycott
provisions. The paragraph then describes specific mitigating and
aggravating factors. OAC generally looks to the presence or absence of
these specific factors in determining what sanctions should apply in a
given settlement.
Paragraph (d) begins by listing seven general factors to which OAC
looks in determining what administrative sanctions are appropriate in
each settlement. Those seven general factors are: degree of
seriousness, category of violation, whether multiple violations arise
from related transactions, whether multiple violations arise from
unrelated transactions, the timing of a settlement, whether there are
related civil or criminal violations, and the party's familiarity with
the antiboycott provisions. The supplement provides general guidance on
how OAC applies each of these seven general factors.
Paragraph (d) then addresses the role of eight specific mitigating
and nine specific aggravating factors whose presence or absence OAC
generally considers when determining what sanctions should apply. The
listed factors are not exhaustive and OAC may consider other factors as
well in a particular case. However, the listed factors are those that
OAC's experience indicates are commonly relevant to penalty
determinations in cases that are settled. Factors identified by the
phrase ``GREAT WEIGHT'' will ordinarily be given considerably more
weight than other factors.
The eight specific mitigating factors in paragraph (d) are:
Voluntary self disclosure, effective compliance program, limited
business with or in boycotting countries, history of compliance with
the antiboycott provisions, exceptional cooperation with the
investigation, (lack of) clarity of request to furnish prohibited
information or take prohibited action, violations arising out of a
party's ``passive'' refusal to do business in connection with an
agreement, and isolated occurrence or good faith misinterpretation.
The nine specific aggravating factors in paragraph (b) are:
concealment or obstruction, serious disregard for compliance
responsibilities, history of (lack of) compliance with the antiboycott
provisions, familiarity with the type of transaction at issue in the
violations, prior history of business with or in boycotted countries or
boycotting countries, long duration or high frequency of violations,
clarity of request to furnish prohibited information or take prohibited
action, violations relating to information concerning a specific
individual or entity, and violations relating to ``active'' conduct
concerning an agreement to refuse to do business.
The specific mitigating and aggravating factors are set forth in
more detail in the supplement. BIS believes that in most cases
evaluating these factors provides a fair basis for determining the
penalty that is appropriate when settling an administrative case.
However, these mitigating and aggravating factors are not exclusive.
BIS may consider other factors that are relevant in a particular case
and respondents in settlement negotiations may submit other relevant
factors for BIS's consideration.
Paragraph (e) sets forth the factors that OAC considers to be
particularly relevant when deciding whether to impose a denial or
exclusion order in the settlement of administrative cases. Certain
factors in paragraph (d)--the four factors that are given great weight,
degree of seriousness, and history of prior violations and their
seriousness--are included in paragraph (f). In addition, BIS considers
the extent to which a firm's senior management participated in or was
aware of the conduct that gave rise to the violation, the likelihood of
future violations, and whether a monetary penalty could be expected to
have a sufficient deterrent effect to be particularly relevant in
determining whether a monetary penalty is appropriate.
Paragraph (f) provides examples of factors that OAC may consider in
deciding whether to suspend or defer a monetary penalty, or suspend an
order denying export privileges or an order providing an exclusion from
practice. With respect to suspension or deferral of monetary penalties
OAC may consider whether the party has demonstrated a limited ability
to pay a penalty that would be appropriate for such violation, so that
suspended or deferred payment can be expected to have sufficient
deterrent value, and whether the impact of the penalty would be
consistent with the impact of penalties on other parties who commit
similar violations. When deciding whether to suspend denial or
exclusion orders OAC may consider the adverse economic consequences of
the order on the party, its employees, and other persons, as well as on
the national interest in the competitiveness of U.S. businesses.
However, such orders will be suspended for adverse economic
consequences only if future violations are unlikely and if there are
adequate measures (usually a substantial civil penalty) to achieve the
necessary deterrent effect.
Rulemaking Requirements
1. This rule has been determined to be not significant for purposes
of Executive Order 12866.
2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply
[[Page 37520]]
with a collection of information, subject to the requirements of the
Paperwork Reduction Act, unless that collection of information displays
a currently valid Office of Management and Budget Control Number. If
adopted as a final rule, this proposed rule would expand the scope of
information collected pursuant to Office of Management and Budget
Control Number 0694-0058. Such an expansion would be subject to the
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) requiring
Office of Management and Budget authorization before implementation.
BIS will prepare documentation for presentation to OMB to obtain
authorization for this expansion. Send comments about this collection,
including suggestions for reducing the burden, to David Rostker, Office
of Management and Budget (OMB), by e-mail to
David_Rostker@omb.eop.gov, or by fax to (202) 395-7285; and to the Office of
Administration, Bureau of Industry and Security, Department of
Commerce, 14th and Pennsylvania Avenue, NW., Room 6883, Washington, DC
20230.
3. This rule does not contain policies with Federalism implications
as that term is defined in Executive Order 13132.
4. The Chief Counsel for Regulation of the Department of Commerce
has certified to the Counsel for Advocacy that this proposed rulemaking
is not expected to have a significant economic impact on a substantial
number of small entities.
Number of Small Entities
As a strictly legal matter, the antiboycott provisions of the
Export Administration Regulations apply to any activities in the
interstate or foreign commerce of the United States by any individual,
or any association or organization, public or private who meets the
regulatory definition of ``United States Person.'' Pursuant to this
standard, virtually any small entity located in the United States could
be subject to these provisions and affected by this proposed rule.
However, the rule addresses self-disclosure of violations of the
antiboycott provisions and OAC's practices in administrative
settlements of alleged or self-disclosed violations of those
provisions. In practice, conduct that would be a violation of the
antiboycott provisions almost always occurs among international banks
and among companies that export to or provide services in the Middle
East. Violations of the antiboycott provisions generally occur in
response to a request to take an action the antiboycott provisions
prohibit or require to be reported or both. Such requests usually arise
in connection with trade in the Middle East. Entities whose business
does not involve transactions originating in the Middle East (or, in
the case of banks, a correspondence relationship with another bank that
deals with transactions originating in the Middle East) are unlikely to
encounter circumstances in which a violation of the antiboycott
provisions could occur. OAC has no information as to what percentage of
small entities are engaged in such transactions, but expects that it
would be only a small fraction of such entities. For example, entities
such as local retailers, gas stations, farm labor contractors, or
entities engaged in local services such as dry cleaning or trash
removal are extremely unlikely to encounter the kind of commercial
transactions in which a violation of the antiboycott provisions is
possible. Furthermore, the absolute numbers of enforcement cases are
small.
OAC opened investigations on 33 entities during the period from
October 2, 2004 through May 16, 2006. Based on the criteria in the
Small Business Administration Table of Small Business Size Standards
effective as of January 5, 2006, OAC believes that 18 of these entities
would qualify as small entities and 15 wold not qualify.
Even assuming that the number of small entities impacted by this
rule is deemed to be significant, the economic impact of this rule
would not impose a significant burden on such entities.
Economic Impact
This proposed rule addresses procedures to be followed in
connection with voluntary self-disclosures of violations of the
antiboycott provisions of the Export Administration Regulations and
describes OAC's practices in settling administrative enforcement cases.
The penalties for violations of the antiboycott provisions can include
civil monetary penalties, denial of export privileges, exclusion from
practice before BIS criminal fine and jail sentences.
Apart from a written initial notification generally describing the
violations and a subsequent written narrative describing the violation
in more detail, the documents that this rule would require persons
making voluntary self disclosures to provide to OAC are documents that
the preexisting recordkeeping requirements of the Export Administration
Regulations require such persons to keep. These documents are currently
collected either by request or pursuant to a subpoena in the course of
enforcement investigations. Under the proposed rule, the documents
would be submitted by the person or organization making the voluntary
self-disclosure as part of that disclosure in advance of a specific
request by OAC. Such voluntary self-disclosures benefit the government
because investigations initiated through voluntary self-disclosures
typically require fewer enforcement staff hours to complete. The rule
recognizes this benefit to the government by treating voluntary
disclosures made in accordance with the provisions of the rule as one
of two possible mitigating factors of ``great weight.'' By the terms of
the rule such factors ``will ordinarily be given considerably more
weight than a factor that is not so designated.'' Thus, a firm that
elected to make a voluntary disclosure under the proposed rule would
likely incur a lesser penalty than a firm that commits a similar
violation that OAC discovers through other means, although both firms
would be likely to incur similar costs in connection with supplying
documents to OAC.
OAC estimates that voluntary disclosures can take require as little
as one staff hour or as much as fifty staff hours to prepare and submit
with the average being about ten staff hours. At an average costs of
$40 per hour, the estimated range of costs is from $40 if one hour is
required to $2,000 if 50 hours are required. The projected average cost
would be $400 per disclosure. However, as noted above, the cost of
supplying documents to OAC in course of an investigation likely would
be incurred by the firm even without this rule or even if the firm
makes no voluntary self-disclosure. Moreover, this rule would reduce
uncertainty for entities that become involved in administrative
enforcement proceedings with BIS regardless of whether the entity made
a voluntary self disclosure because the rule would set forth as a
matter of public record the factors that BIS typically considers in
settling administrative enforcement cases.
This proposed rule would not alter the elements of the offense with
respect to any violation of the EAR, it would not expand scope of the
information that OAC collects when it conducts individual enforcement
investigations and it would not authorize OAC to collect this
information in situations other than individual enforcement
investigations. The effect of this proposed rule would be to reduce
uncertainty for persons contemplating voluntary self-disclosures and
for persons engaged in administrative
[[Page 37521]]
enforcement settlement negotiations with OAC.
Accordingly, the Chief Counsel for Regulation of the Department of
Commerce has certified to the Chief Counsel of Advocacy that this
proposed rule will not have a significant economic impact on a
substantial number of small entities.
BIS will consider all comments received on or before August 29,
2006. BIS will consider comments received after that date if possible
but cannot assure such consideration. All public comments on this
proposed rule must be in writing (including fax or e-mail) and will be
a matter of public record, available for public inspection and copying.
The Office of Administration, Bureau of Industry and Security, U.S.
Department of Commerce, displays these public comments on BIS's Freedom
of Information Act (FOIA) Web site at http://www.bis.doc.gov/foia. This
office does not maintain a separate public inspection facility. If you
have technical difficulties accessing this web site, please call BIS's
Office of Administration at (202) 482-0637 for assistance.
List of Subjects
15 CFR Part 764
Administrative practice and procedure, Exports, Law enforcement,
Penalties.
15 CFR Part 766
Administrative practice and procedure, Confidential business
information, Exports, Law enforcement, Penalties.
For the reasons discussed in the preamble, this proposed rule would
amend the Export Administration Regulations 15 CFR Parts 764 and 766 as
follows:
PART 764--[AMENDED]
1. The authority citation for part 764 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August
2, 2005, 70 FR 45273 (August 5, 2005).
2. Add a new Sec. 764.8 to read as follows:
Sec. 764.8 Voluntary self-disclosures for boycott violations.
This section sets forth procedures for disclosing violations of
part 760 of the EAR--Restrictive Trade Practices or Boycotts and
violations of part 762--Recordkeeping--with respect to records related
to part 760. In this section, these provisions are referred to
collectively as the antiboycott provisions. This section also describes
BIS's policy regarding such disclosures.
(a) General policy. BIS strongly encourages disclosure to the
Office of Antiboycott Compliance if you believe that you may have
violated the antiboycott provisions. Voluntary self-disclosures are a
mitigating factor with respect to any enforcement action that OAC might
take.
(b) Limitations. (1) This section does not apply to disclosures of
violations relating provisions of the EAR other than the antiboycott
provisions. Section 764.5 of this part describes how to prepare
disclosures of violations of the EAR other than the antiboycott
provisions.
(2) The provisions of this section apply only when information is
provided to OAC for its review in determining whether to take
administrative action under part 766 of the EAR for violations of the
antiboycott provisions.
(3) Timing: The provisions of this section apply only if OAC
receives the voluntary self-disclosure as described in paragraph (c)(2)
of this section and commences an investigation or inquiry in connection
with that information before it receives the same or substantially
similar information from another source.
(i) Mandatory Reports. For purposes of this section, OAC's receipt
of a report required to be filed under Sec. 760.5 of the EAR that
discloses that a person took an action prohibited by part 760 of the
EAR is receipt of information from another source.
(ii) Requests for Advice. For purposes of this section, a violation
that is revealed to OAC by a person who is seeking advice, either by
telephone or e-mail, about the antiboycott provisions is not receipt of
information from another source. Such revelation also is not a
voluntary disclosure or initial notification of a voluntary disclosure
for purposes of this section.
(4) Although a voluntary self-disclosure is a mitigating factor in
determining what administrative sanctions, if any, will be sought by
OAC, it is a factor that is considered together with all other factors
in a case. The weight given to voluntary self-disclosure is solely
within the discretion of OAC, and the mitigating effect of voluntary
self-disclosure may be outweighed by aggravating factors. Voluntary
self-disclosure does not prevent transactions from being referred to
the Department of Justice for criminal prosecution. In such a case, OAC
would notify the Department of Justice of the voluntary self-
disclosure, but the consideration of that factor is within the
discretion of the Department of Justice.
(5) A firm will not be deemed to have made a disclosure under this
section unless the individual making the disclosure did so with the
full knowledge and authorization of the firm's senior management.
(6) The provisions of this section do not, nor should they be
relied on to, create, confer, or grant any rights, benefits,
privileges, or protection enforceable at law or in equity by any
person, business, or entity in any civil, criminal, administrative, or
other matter.
(c) Information to be provided--(1) General. Any person wanting to
disclose information that constitutes a voluntary self-disclosure
should, in the manner outlined below, initially notify OAC as soon as
possible after violations are discovered, and then conduct a thorough
review of all transactions where violations of the antiboycott
provisions are suspected.
(2) Initial notification. The initial notification must be in
writing and be sent to the address in Sec. 764.8(c)(7) of this part.
The notification should include the name of the person making the
disclosure and a brief description of the suspected violations. The
notification should describe the general nature and extent of the
violations. If the person making the disclosure subsequently completes
the narrative account required by Sec. 764.8(c)(3) of this part, the
disclosure will be deemed to have been made on the date of the initial
notification for purposes of Sec. 764.8(b)(3) of this part.
(3) Narrative account. After the initial notification, a thorough
review should be conducted of all business transactions where possible
antiboycott provision violations are suspected. OAC recommends that the
review cover a period of five years prior to the date of the initial
notification. If your review goes back less than five years, you risk
failing to discover violations that may later become the subject of an
investigation. Any violations not voluntarily disclosed do not receive
the same mitigation as the violations voluntarily self-disclosed under
this section. However, the failure to make such disclosures will not be
treated as a separate violation unless some other section of the EAR or
other provision of law requires disclosure. Upon completion of the
review, OAC should be furnished with a narrative account that
sufficiently describes the suspected violations so that their nature
and gravity can be assessed. The narrative account should also describe
the nature of the review conducted and measures
[[Page 37522]]
that may have been taken to minimize the likelihood that violations
will occur in the future. The narrative account should include:
(i) The kind of violation involved, for example, the furnishing of
a certificate indicating that the goods supplied did not originate in a
boycotted country;
(ii) An explanation of when and how the violations occurred,
including a description of activities surrounding the violations (e.g.,
contract negotiations, sale of goods, implementation of letter of
credit, bid solicitation);
(iii) The complete identities and addresses of all individuals and
organizations, whether foreign or domestic, involved in the activities
giving rise to the violations; and
(iv) A description of any mitigating factors.
(4) Supporting documentation. (i) The narrative account should be
accompanied by copies of documents that explain and support it,
including:
(A) Copies of boycott certifications and declarations relating to
the violation, or copies of documents containing prohibited language or
prohibited requests for information;
(B) Other documents relating to the violation, such as letters,
facsimiles, telexes and other evidence of written or oral
communications, negotiations, internal memoranda, purchase orders,
invoices, bid requests, letters of credit and brochures;
(ii) Any relevant documents not attached to the narrative account
must be retained by the person making the disclosure until the latest
of the following: The documents are supplied to OAC, OAC issues a
warning letter for the violation, BIS issues an order that constitutes
the final agency action in the matter and all avenues for appeal are
exhausted; or the documents are no longer required to be kept under
part 762 of the EAR.
(5) Certification. A certification must be submitted stating that
all of the representations made in connection with the voluntary self-
disclosure are true and correct to the best of that person's knowledge
and belief. Certifications made by a corporation or other organization
should be signed by an official of the corporation or other
organization with the authority to do so. Section 764.2(g) of this part
relating to false or misleading representations applies in connection
with the disclosure of information under this section.
(6) Oral presentations. OAC believes that oral presentations are
generally not necessary to augment the written narrative account and
supporting documentation. If the person making the disclosure believes
otherwise, a request for a meeting should be included with the
disclosure.
(7) Where to make voluntary self-disclosures. The information
constituting a voluntary self-disclosure or any other correspondence
pertaining to a voluntary self-disclosure should be submitted to:
Office of Antiboycott Compliance, 14th and Pennsylvania Ave., NW., Room
6098, Washington, DC 20230, Tel: (202) 482-2381, Facsimile: (202) 482-
0913.
(d) Action by the Office of Antiboycott Compliance. After OAC has
been provided with the required narrative and supporting documentation,
it will acknowledge the disclosure by letter, provide the person making
the disclosure with a point of contact, and take whatever additional
action, including further investigation, it deems appropriate. As
quickly as the facts and circumstances of a given case permit, OAC may
take any of the following actions:
(1) Inform the person making the disclosure that, based on the
facts disclosed, it plans to take no action;
(2) Issue a warning letter;
(3) Issue a proposed charging letter pursuant to Sec. 766.18 of
the EAR and attempt to settle the matter;
(4) Issue a charging letter pursuant to Sec. 766.3 of the EAR if a
settlement is not reached; and/or
(5) Refer the matter to the Department of Justice for criminal
prosecution.
(e) Criteria. Supplement No. 2 to part 766 describes how BIS
typically exercises its discretion regarding whether to pursue an
administrative enforcement case under part 766 and what administrative
sanctions to seek in settling such a case.
(f) Treatment of unlawful transactions after voluntary self-
disclosure. Any person taking certain actions with knowledge that a
violation of the EAA or the EAR has occurred has violated Sec.
764.2(e) of this part. Any person who has made a voluntary self-
disclosure knows that a violation may have occurred. Therefore, at the
time that a voluntary self-disclosure is made, the person making the
disclosure may request permission from BIS to engage in the activities
described in Sec. 764.2(e) of this part that would otherwise be
prohibited. If the request is granted by Office of Exporter Services in
consultation with OAC, future activities with respect to those items
that would otherwise violate Sec. 764.2(e) of this part will not
constitute violations. However, even if permission is granted, the
person making the voluntary self-disclosure is not absolved from
liability for any violations disclosed.
3. The authority citation for part 766 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August
2, 2005, 70 FR 45273 (August 5, 2005).
PART 766--[AMENDED]
4. In Sec. 766.3, paragraph (a) the second sentence is revised to
read as follows:
Sec. 766.3 Institution of administrative enforcement proceedings.
(a) Charging letters. * * * Supplements numbers 1 and 2 to this
part describe how BIS typically exercises its discretion regarding the
issuance of charging letters. * * *
5. In Sec. 766.18 paragraph (f) is revised to read as follows:
Sec. 766.18 Settlement.
* * * * *
(f) Supplements Numbers 1 and 2 to this part describe how BIS
typically exercises its discretion regarding the terms under which it
is willing to settle particular cases.
6. Add a Supplement No. 2 to part 766 to read as follows:
Supplement No. 2 to Part 766--Guidance on Charging and Penalty
Determinations in Settlement of Administrative Enforcement Cases
Involving Antiboycott Matters
(a) Introduction--(1) Scope. This Supplement describes how the
Office of Antiboycott Compliance responds to violations of part 760
of the EAR ``Restrictive Trade Practices or Boycotts'' and to
violations of part 762 ``Recordkeeping'' when the recordkeeping
requirement pertains to part 760 (together referred to in this
supplement as the ``antiboycott provisions''). It also describes how
OAC makes penalty determinations in the settlement of administrative
enforcement cases brought under parts 764 and 766 of the EAR
involving violations of the antiboycott provisions. This supplement
does not apply to enforcement cases for violations of other
provisions of the EAR.
(2) Policy Regarding Settlement. Because many administrative
enforcement cases are resolved through settlement, the process of
settling such cases is integral to the enforcement program. OAC
carefully considers each settlement offer in light of the facts and
circumstances of the case, relevant precedent, and OAC's objective
to achieve in each case an appropriate level of penalty and
deterrent effect. In settlement negotiations, OAC encourages parties
to provide, and will give serious consideration to, information and
evidence that the parties believe is relevant to the application of
this guidance to their cases, to whether a violation has in fact
occurred, and to whether they have a defense to potential charges.
(3) Limitation. OAC's policy and practice is to treat similarly
situated cases similarly, taking into consideration that the facts
and
[[Page 37523]]
combination of mitigating and aggravating factors are different in
each case. However, this guidance does not confer any right or
impose any obligation regarding what penalties BIS may seek in
litigating a case or what posture OAC may take toward settling a
case. Parties do not have a right to a settlement offer, or
particular settlement terms, from OAC, regardless of settlement
postures OAC has taken in other cases.
(b) Responding to Violations. OAC within BIS investigates
possible violations of Section 8 of the Export Administration Act of
1979, as amended (``Foreign Boycotts''), the antiboycott provisions
of EAR, or any order or authorization related thereto. When OAC has
reason to believe that such a violation has occurred, OAC may issue
a warning letter or initiate an administrative enforcement
proceeding. A violation may also be referred to the Department of
Justice for criminal prosecution.
(1) Issuing a warning letter. Warning letters represent OAC's
belief that a violation has occurred. In the exercise of its
discretion, OAC may determine in certain instances that issuing a
warning letter, instead of bringing an administrative enforcement
proceeding, will fulfill the appropriate enforcement objective. A
warning letter will fully explain the violation.
(i) OAC often issues warning letters where:
(A) The investigation commenced as a result of a voluntary self-
disclosure satisfying the requirements of Sec. 764.8 of the EAR; or
(B) The party has not previously committed violations of the
antiboycott provisions.
(ii) OAC may also consider the category of violation as
discussed in paragraph (d)(2) of this supplement in determining
whether to issue a warning letter or initiate an enforcement
proceeding. A violation covered by Category C (failure to report or
late reporting of receipt of boycott requests) might warrant a
warning letter rather than initiation of an enforcement proceeding.
(iii) OAC will not issue a warning letter if it concludes, based
on available information, that a violation did not occur.
(iv) OAC may reopen its investigation of this matter should it
receive additional evidence or if it appears that information
previously provided to OAC during the course of its investigation
was incorrect.
(2) Pursuing an administrative enforcement case. The issuance of
a charging letter under Sec. 766.3 of this part initiates an
administrative proceeding.
(i) Charging letters may be issued when there is reason to
believe that a violation has occurred. Cases may be settled before
or after the issuance of a charging letter. See Sec. 766.18 of this
part.
(ii) Although not required to do so by law, OAC may send a
proposed charging letter to a party to inform the party of the
violations that BIS has reason to believe occurred and how OAC
expects that those violations would be charged. Issuance of the
proposed charging letter provides an opportunity for the party and
OAC to consider settlement of the case prior to the initiation of
formal enforcement proceedings.
(3) Referring for criminal prosecution. In appropriate cases,
OAC may refer a case to the Department of Justice for criminal
prosecution, in addition to pursuing an administrative enforcement
action.
(c) Types of administrative sanctions. Administrative
enforcement cases generally are settled on terms that include one or
more of three administrative sanctions:
(1) A monetary penalty may be assessed for each violation. The
maximum such penalty is stated in Sec. 764.3(a)(1) of the EAR, and
is subject to adjustments under the Federal Civil Penalties
Adjustment Act of 1990 (28 U.S.C. 2461, note (2000)), which are
codified at 15 CFR 6.4;
(2) An order denying a party's export privileges may be issued,
under Sec. 764.3(a)(2) of the EAR; or
(3) Exclusion from practice under Sec. 764.3(a)(3) of the EAR.
(d) How BIS determines what sanctions are appropriate in a
settlement--(1) General Factors. OAC looks to the following general
factors in determining what administrative sanctions are appropriate
in each settlement.
(i) Degree of seriousness. In order to violate the antiboycott
provisions of the EAR, a U.S. person does not need to have actual
``knowledge'' or a reason to know, as that term is defined in Sec.
772.1 of the EAR, of relevant U.S. laws and regulations. Typically,
in cases that do not involve knowing violations, OAC will seek a
settlement for payment of a civil penalty (unless the matter is
resolved with a warning letter). However, in cases involving knowing
violations, conscious disregard of the antiboycott provisions, or
other such serious violations (e.g., furnishing prohibited
information in response to a boycott questionnaire with knowledge
that such furnishing is in violation of the EAR), OAC is more likely
to seek a denial of export privileges or an exclusion from practice,
and/or a greater monetary penalty as OAC considers such violations
particularly egregious.
(ii) Category of violations. In connection with its activities
described in paragraph (a)(1) of this supplement, BIS recognizes
three categories of violations under the antiboycott provisions of
the EAR. (See Sec. 760.2, Sec. 760.4 and Sec. 760.5 of the EAR
for examples of each type of violation other than recordkeeping).
These categories reflect the relative seriousness of a violation,
with Category A violations typically warranting the most stringent
penalties, including up to the maximum monetary penalty, and/or a
denial order and exclusion order. Through providing these categories
in this penalty guidelines notice, BIS hopes to give parties a
general sense of how it views the seriousness of various violations.
This guidance, however, does not confer any right or impose any
obligation as to what penalties BIS may impose based on its review
of the specific facts of a case.
(A) The category A violations and the sections of the EAR that
set forth their elements are:
(1) Discriminating against U.S. persons on the basis of race,
religion, sex, or national origin--Sec. 760.2(b);
(2) Refusing to do business or agreeing to refuse to do
business--Sec. 760.2(a);
(3) Furnishing information about race, religion, sex, or
national origin of U.S. persons including, but not limited to,
providing information in connection with a boycott questionnaire
about the religion of employees--Sec. 760.2(c);
(4) Evading the provisions of part 760--Sec. 760.4;
(5) Furnishing information about business relationships with
boycotted countries or blacklisted persons--Sec. 760.2(d); and
(6) Implementing letters of credit--Sec. 760.2(f).
(B) The category B violations and the provisions of the EAR that
set forth their elements are:
(1) Furnishing information about associations with charitable or
fraternal organizations which support a boycotted country--Sec.
760.2(e); and
(2) Making recordkeeping violations--part 762.
(C) The category C violation and the section of the EAR that
sets forth its elements is--Failing to report timely receipt of
boycott requests--Sec. 760.5.
(iii) Violations arising out of related transactions.
Frequently, a single transaction can give rise to multiple
violations. Depending on the facts and circumstances, OAC may choose
to impose a smaller or greater penalty per violation. In exercising
its discretion, OAC typically looks to factors such as whether the
violations resulted from conscious disregard of the requirements of
the antiboycott provisions; whether they stemmed from the same
underlying error or omission; and whether they resulted in
distinguishable or separate harm. The three scenarios set forth
below are illustrative of how OAC might view transactions that lead
to multiple violations.
(A) First scenario. An exporter enters into a sales agreement
with a company in a boycotting country. In the course of the
negotiations, the company sends the exporter a request for a signed
statement certifying that the goods to be supplied do not originate
in a boycotted country. The exporter provides the signed
certification. Subsequently, the supplier fails to report the
receipt of the request. The supplier has committed two violations of
the antiboycott provisions, first, a violation of Sec. 760.2(d) for
furnishing information concerning the past or present business
relationships with or in a boycotted country, and second, a
violation of Sec. 760.5 for failure to report the receipt of a
request to engage in a restrictive trade practice or boycott.
Although the supplier has committed two violations, OAC may impose a
smaller mitigated penalty on a per violation basis than if the
violations had stemmed from two separate transactions.
(B) Second scenario. An exporter receives a boycott request to
provide a statement that the goods at issue in a sales transaction
do not contain raw materials from a boycotted country and to include
the signed statement along with the invoice. The goods are shipped
in ten separate shipments. Each shipment includes a copy of the
invoice and a copy of the signed boycott-related statement. Each
signed statement is a certification that has been furnished in
violation of Sec. 760.2(d)'s bar on the furnishing of prohibited
business information. Technically, the exporter has committed ten
[[Page 37524]]
separate violations of Sec. 760.2(d) and one violation of Sec.
760.5 for failure to report receipt of the boycott request. Given
that the violations arose from a single boycott request, however,
OAC may treat the violations as related and impose a smaller penalty
than it would if the furnishing had stemmed from ten separate
requests.
(C) Third scenario. An exporter has an ongoing relationship with
a company in a boycotting country. The company places three separate
orders for goods on different dates with the exporter. In connection
with each order, the company requests the exporter to provide a
signed statement certifying that the goods to be supplied do not
originate in a boycotted country. The exporter provides a signed
certification with each order of goods that it ships to the company.
OAC has the discretion to penalize the furnishing of each of these
three items of information as a separate violation of Sec. 760.2(d)
of the EAR for furnishing information concerning past or present
business relationships with or in a boycotted country.
(iv) Multiple violations from unrelated transactions. In cases
involving multiple unrelated violations, OAC is more likely to seek
a denial of export privileges, an exclusion from practice, and/or a
greater monetary penalty than in cases involving isolated incidents.
For example, the repeated furnishing of prohibited boycott-related
information about business relationships with or in boycotted
countries during a long period of time could warrant a denial order,
even if a single instance of furnishing such information might
warrant only a monetary penalty. OAC takes this approach because
multiple violations may indicate serious compliance problems and a
resulting risk of future violations. OAC may consider whether a
party has taken effective steps to address compliance concerns in
determining whether multiple violations warrant a denial or
exclusion order in a particular case.
(v) Timing of settlement. Under Sec. 766.18 of this part,
settlement can occur before a charging letter is served, while a
case is before an administrative law judge, or while a case is
before the Under Secretary for Industry and Security under Sec.
766.22 of this part. However, early settlement--for example, before
a charging letter has been served--has the benefit of freeing
resources for OAC to deploy in other matters. In contrast, for
example, the OAC resources saved by settlement on the eve of an
adversary hearing under Sec. 766.13 of this part are fewer, insofar
as OAC has already expended significant resources on discovery,
motions practice, and trial preparation. Given the importance of
allocating OAC resources to maximize enforcement of the EAR, OAC has
an interest in encouraging early settlement and will take this
interest into account in determining settlement terms.
(vi) Related criminal or civil violations. Where an
administrative enforcement matter under the antiboycott provisions
involves conduct giving rise to related criminal charges, OAC may
take into account the related violations, and their resolution, in
determining what administrative sanctions are appropriate under part
766 of the EAR. A criminal conviction indicates serious, willful
misconduct and an accordingly high risk of future violations, absent
effective administrative sanctions. However, entry of a guilty plea
can be a sign that a party accepts responsibility for complying with
the antiboycott provisions and will take greater care to do so in
the future. In appropriate cases where a party is receiving
substantial criminal penalties, OAC may find that sufficient
deterrence may be achieved by lesser administrative sanctions than
would be appropriate in the absence of criminal penalties.
Conversely, OAC might seek greater administrative sanctions in an
otherwise similar case where a party is not subjected to criminal
penalties. The presence of a related criminal or civil disposition
may distinguish settlements among civil penalty cases that appear to
be otherwise similar. As a result, the factors set forth for
consideration in civil penalty settlements will often be applied
differently in the context of a ``global settlement'' of both civil
and criminal cases, or multiple civil cases involving other
agencies, and may therefore be of limited utility as precedent for
future cases, particularly those not involving a global settlement.
(vii) Familiarity with the Antiboycott Provisions. Given the
scope and detailed nature of the antiboycott provisions, OAC will
consider whether a party is an experienced participant in the
international business arena who may possess (or ought to possess)
familiarity with the antiboycott laws. In this respect, the size of
the party's business, the presence or absence of a legal division or
corporate compliance program, and the extent of prior involvement in
business with or in boycotted or boycotting countries, may be
significant.
(2) Specific mitigating and aggravating factors. In addition to
the general factors described in paragraph (d)(1) of this
supplement, OAC also generally looks to the presence or absence of
the specific mitigating and aggravating factors in this paragraph in
determining what sanctions should apply in a given settlement. These
factors describe circumstances that, in BIS's experience, are
commonly relevant to penalty determinations in settled cases.
However, this listing of factors is not exhaustive and, in
particular cases, OAC may consider other factors that may further
indicate the blameworthiness of a party's conduct, the actual or
potential harm associated with a violation, the likelihood of future
violations, and/or other considerations relevant to determining what
sanctions are appropriate. The assignment of mitigating or
aggravating factors will depend upon the attendant circumstances of
the party's conduct. Thus, for example, one prior violation should
be given less weight than a history of multiple violations, and a
previous violation reported in a voluntary self-disclosure by a
party whose overall compliance efforts are of high quality should be
given less weight than previous violation(s) not involving such
mitigating factors. Some of the mitigating factors listed in this
paragraph are designated as having ``great weight.'' When present,
such a factor should ordinarily be given considerably more weight
than a factor that is not so designated.
(i) Mitigating factors--(A) Voluntary self-disclosure. (GREAT
WEIGHT) The party has made a voluntary self-disclosure of the
violation, satisfying the requirements of Sec. 764.8 of the EAR.
(B) Effective compliance program (GREAT WEIGHT)--(1) General
policy or program pertaining to Antiboycott Provisions. In the case
of a party that has done previous business with or in boycotted
countries or boycotting countries, the party has an effective
antiboycott compliance program and its overall antiboycott
compliance efforts have been of high quality. The focus is on the
party's demonstrated compliance with the antiboycott provisions.
Whether a party has an effective export compliance program covering
other provisions of the EAR is not relevant as a mitigating factor.
OAC may deem it appropriate to review the party's internal business
documents relating to antiboycott compliance (e.g,. corporate
compliance manuals, employee training materials). In this context,
OAC will also consider whether a party's antiboycott compliance
program uncovered a problem, thereby preventing further violations,
and whether the party has taken steps to address compliance concerns
raised by the violation, including steps to prevent recurrence of
the violation, that are reasonably calculated to be effective.
(2) Compliance with reporting and recordkeeping requirements. In
the case of a party that has received reportable boycott requests in
the past, OAC may examine whether the party complied with the
reporting and recordkeeping requirements of the antiboycott
provisions. With respect to recordkeeping, whether records were
destroyed deliberately or intentionally may be an issue.
(C) Limited business with or in boycotted or boycotting
countries. The party has had little to no previous experience in
conducting business with or in boycotted or boycotting countries.
Prior to the current enforcement proceeding, the party had not
engaged in business with or in such countries, or had only
transacted such business on isolated occasions. OAC may examine the
volume of business that the party has conducted with or in boycotted
or boycotting countries as demonstrated by the size and dollar
amount of transactions or the percentage of a party's overall
business that such business constitutes.
(D) History of compliance with the Antiboycott Provisions of the
EAR and export-related laws and regulations.
(1) OAC will consider it to be a mitigating factor if:
(i) The party has never been convicted of a criminal violation
of the antiboycott provisions;
(ii) In the past 5 years, the party has never entered into a
settlement or been found liable in a boycott-related administrative
enforcement case with BIS or another U.S. government agency;
(iii) In the past 3 years, the party has not received a warning
letter from BIS; or
(iv) In the past 5 years, the party has never otherwise violated
the antiboycott provisions.
(2) Where necessary to ensure effective enforcement, the prior
involvement in
[[Page 37525]]
violations of the antiboycott provisions of a party's owners,
directors, officers, partners, or other related persons may be
imputed to a party in determining whether these criteria are
satisfied.
(3) When an acquiring firm takes reasonable steps to uncover,
correct, and disclose to OAC conduct that gave rise to violations
that the acquired business committed before the acquisition, OAC
typically will not take such violations into account in applying
this factor in settling other violations by the acquiring firm.
(E) Exceptional cooperation with the investigation. The party
has provided exceptional cooperation to OAC during the course of the
investigation.
(F) Clarity of request to furnish prohibited information or take
prohibited action. The party responded to a request to furnish
information or take action that was ambiguously worded or vague.
(G) Violations arising out of a party's ``passive'' refusal to
do business in connection with an agreement. The party has
acquiesced in or abided by terms or conditions that constitute a
prohibited refusal to do business (e.g., responded to a tender
document that contains prohibited language by sending a bid). See
``active'' agreements to refuse to do business in paragraph
(d)(2)(ii)(I) of this supplement.
(H) Isolated occurrence of violation. The violation was an
isolated occurrence. (Compare to long duration or high frequency of
violations as an aggravating factor in paragraph (d)(2)(ii)(F) of
this supplement.)
(ii) Specific Aggravating Factors--(A) Concealment or
obstruction. The party made a deliberate effort to hide or conceal
the violation. [GREAT WEIGHT]
(B) Serious disregard for compliance responsibilities. [GREAT
WEIGHT] There is evidence that the party's conduct demonstrated a
serious disregard for responsibilities associated with compliance
with the antiboycott provisions (e.g.: knowing violation of party's
own compliance policy or evidence that a party chose to treat
potential penalties as a cost of doing business rather than develop
a compliance policy).
(C) History of compliance with the Antiboycott Regulations and
export-related laws and regulations.
(1) OAC will consider it to be an aggravating factor if:
(i) The party has been convicted of a criminal violation of the
antiboycott provisions;
(ii) In the past 5 years, the party has entered into a
settlement or been found liable in a boycott-related administrative
enforcement case with BIS or another U.S. government agency;
(iii) In the past 3 years, the party has received a warning
letter from OAC; or
(v) In the past 5 years, the party has otherwise violated the
antiboycott provisions.
(2) Where necessary to ensure effective enforcement, the prior
involvement in violations of the antiboycott provisions of a party's
owners, directors, officers, partners, or other related persons may
be imputed to a party in determining whether these criteria are
satisfied.
(3) When an acquiring firm takes reasonable steps to uncover,
correct, and disclose to OAC conduct that gave rise to violations
that the acquired business committed before the acquisition, OAC
typically will not take such violations into account in applying
this factor in settling other violations by the acquiring firm.
(D) Familiarity with the type of transaction at issue in the
violation. For example, in the case of a violation involving a
letter of credit or related financial document, the party routinely
pays, negotiates, confirms, or otherwise implements letters of
credits or related financial documents in the course of its standard
business practices.
(E) Prior history of business with or in boycotted countries or
boycotting countries. The party has a prior history of conducting
business with or in boycotted and boycotting countries. OAC may
examine the volume of business that the party has conducted with or
in boycotted and boycotting countries as reflected by the size and
dollar amount of transactions or the percentage of a party's overall
business that such business constitutes.
(F) Long duration/high frequency of violations. Violations that
occur at frequent intervals or repeated violations occurring over an
extended period of time may be treated more seriously than a single
isolated violation that is committed within a brief period of time,
particularly if the violations are committed by a party with a
history of business with or in boycotted and boycotting countries.
(Compare to isolated occurrence of violation or good-faith
misinterpretation in paragraph (d)(2)(i)(H) of this supplement.)
(G) Clarity of request to furnish prohibited information or take
prohibited action. The request to furnish information or take other
prohibited action (e.g., enter into agreement to refuse to do
business with a boycotted country or entity blacklisted by a
boycotting country) is facially clear as to its intended purpose.
(H) Violation relating to specific information concerning an
individual entity or individual. The party has furnished prohibited
information about business relationships with specific companies or
individuals.
(I) Violations relating to ``active'' conduct concerning an
agreement to refuse to do business. The party has taken action that
involves altering, editing, or enhancing prohibited terms or
language in an agreement to refuse to do business, including a
letter of credit, or drafting a clause or provision including
prohibited terms or language in the course of negotiating an
agreement to refuse to do business, including a letter of credit.
See ``passive'' agreements to refuse to do business in paragraph
(d)(2)(ii)(G) of this supplement.
(e) Determination of Scope of Denial or Exclusion Order. In
deciding whether and what scope of denial or exclusion order is
appropriate, the following factors are particularly relevant: The
presence of mitigating or aggravating factors of great weight; the
degree of seriousness involved; in a business context, the extent to
which senior management participated in or was aware of the conduct
in question; the number of violations; the existence and seriousness
of prior violations; the likelihood of future violations (taking
into account relevant efforts to comply with the antiboycott
provisions); and whether a monetary penalty can be expected to have
a sufficient deterrent effect.
(f) How OAC Makes Suspension and Deferral Decisions--(1) Civil
Penalties. In appropriate cases, payment of a civil monetary penalty
may be deferred or suspended. See Sec. 764.3(a)(1)(iii) of the EAR.
In determining whether suspension or deferral is appropriate, OAC
may consider, for example, whether the party has demonstrated a
limited ability to pay a penalty that would be appropriate for such
violations, so that suspended or deferred payment can be expected to
have sufficient deterrent value, and whether, in light of all the
circumstances, such suspension or deferral is necessary to make the
impact of the penalty consistent with the impact of OAC penalties on
other parties who committed similar violations.
(2) Denial of Export Privileges and Exclusion from Practice. In
deciding whether a denial or exclusion order should be suspended,
OAC may consider, for example, the adverse economic consequences of
the order on the party, its employees, and other persons, as well as
on the national interest in the competitiveness of U.S. businesses.
An otherwise appropriate denial or exclusion order will be suspended
on the basis of adverse economic consequences only if it is found
that future violations of the antiboycott provisions are unlikely
and if there are adequate measures (usually a substantial civil
penalty) to achieve the necessary deterrent effect.
Dated: June 26, 2006.
Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 06-5917 Filed 6-29-06; 8:45 am]
BILLING CODE 3510-33-P